Tax Havens: Small States with Great Influence on Economic Policy

• Applicant: Professorin Dr. Dominika Langenmayr
• Subject Area: Economic Policy, Applied Economics
• Term: from 2014 to 2015
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 260655345

Tax havens are small (only 1.2% of the world's population lives in them), but economically very important: Individuals hold about US-$ 6 trillion in tax havens. Firms also use tax havens extensively. The British Virgin Islands, with a population of only 31,000, are the 5th biggest destination for foreign direct investment in the world. It is a highly relevant topic how other states should respond to tax havens. Many governments are highly indebted in the aftermath of the financial and Euro crises and therefore less tolerant towards very low tax payments by some firms and individuals. Moreover, tax havens feature not only low tax rates, but also low levels of regulation. Therefore, also the current debate about the regulation of the financial sector has to take offshore financial centers into account. This research project analyzing the effects of tax havens on other states' tax and regulation policy considers three core areas: Tax evasion by individuals, new measures against corporate profit shifting, and the interaction of low tax rates and low regulation levels of banks. In each part, the focus in on the empirical analysis, but the econometric estimations will be based on theoretical models.

• DFG Programme: Research Fellowships
• International Connection: United Kingdom, USA
• Hosts: Professor Michael P. Devereux, Ph.D.; Professor Roger Gordon, Ph.D.